California’s fledgling cap-and-trade program continues to struggle to get out of the gate. Last summer we noted that one of the Golden State’s quarterly auctions of carbon credits brought in just 2 percent of the revenues it was expected to generate. Two months later, state officials reported that permit sales were well below projected levels, while that same day the California legislature passed a bill that extended a program that even then was clearly broken. Six months later, and quarterly auctions are continuing to disappoint. The Sacramento Bee reports:

Results for last week’s auction were posted Wednesday morning, revealing that just 16.5 percent of the 74.8 million metric tons of emission allowances were sold at the floor price of $13.57 per ton…February’s auction is being closely watched by market analysts because the last three quarterly auctions in 2016 posted sub-par results.

A 16.5 percent participation rate in a scheme like this is abysmal, and it’s compounded by the fact that what few permits that were sold went for the lowest possible price. Clearly, something is amiss here.

So how have things gone so wrong for California’s “groundbreaking” carbon market? It’s not terribly complicated. California’s system is plagued by the same problem that any regional carbon market necessarily struggles with: carbon leakage. If regulators set a minimum permit price that’s too high, they’ll push heavy emitters out into other states (or countries), losing valuable jobs and tax revenue while doing nothing to actually reduce emissions—a process also known as carbon leakage. That’s obviously the worst-case scenario, and it explains why both California and the European Union have such cheap carbon prices.

But when those prices are sold at such a bargain, or permits are over-allocated to heavy emitters, there’s little incentive to change behaviors to mitigate climate change, and the whole system becomes, well, useless. Regulators understand this, of course, and look to try and find that “Goldilocks” price between those two extremes, but that’s clearly easier said than done. Brussels still hasn’t found that mythical balance, and neither has Sacramento.

California’s case is special, though. One of the reasons companies are passing up the chance to buy these carbon permits—even at bargain basement prices—is because of concern that a the California Chamber of Commerce lawsuit against the state over the constitutionality of the program could end up dissolving the whole market.

Regional cap-and-trade schemes are always going to struggle for viability, but California’s might be the worst of the lot. It’s been gasping for air since its inception, and there’s no sign that the state is capable of turning this green policy disaster around. We’ll be watching.